Charter Communications, Inc. (NASDAQ:CHTR) Credit Suisse Communications Conference June 15, 2022 10:40 AM ET
Company Participants
Jessica Fischer – CFO
Conference Call Participants
Douglas Mitchelson – Credit Suisse
Douglas Mitchelson
Good morning. I am Doug Mitchelson, Credit Suisse’s media and cable satellite and wireless analyst. Very pleased to have with us today, Jessica Fischer, Chief Financial Officer of Charter Communications, for our next keynote presentation. This will be a fireside chat format, and my questions are pretty likely to run the full time. Feel free to email me questions. I’ll work them in, if I can.
Jessica, thank you so much for your time today, and welcome to your first Credit Suisse conference presentation. Nice breath of fresh air from Tom and Chris. Welcome.
Jessica Fischer
Thanks, Doug. Happy to be here.
Question-and-Answer Session
Q – Douglas Mitchelson
So about 8 months into this role. So let me start with state of the union. How is Charter positioned from your point of view? How do you believe the management team can maximize value from here?
Jessica Fischer
We’re positioned extraordinarily well. We’re a growing business. We’re growing, both from a customer perspective and financially really well. We’re positioned from a balance sheet perspective. I think we have a well-engineered balance sheet coming into the economic environment that we’re in. And we’re investing for growth in the future.
So I think there may be four ways that you can think about that growth. One is we’re continuing to invest in our customer service systems and our infrastructure so that we can do what we’ve always done, which is to provide high-quality service to customers and to do that at value-based prices in a way that grows our overall customer profile.
We’re investing in expanding our footprint, whether that’s through the rail construction initiative or just other edge builds in our footprint to create growth in future years. We’re investing in network upgrades, whether that’s Spectrum splits or moving to Spectrum splits on DOCSIS 4.0 or wherever the technology path best takes us.
And then the last piece, we’re investing in mobile, and I’m really excited about the mobile business. Mobile is a huge market. We, thus far, have a small piece of it. But we have a real opportunity there to continue to grow mobile customers to save customers money while we do that and also to offer them a better experience, given what we can do with our Wi-Fi and CBRS networks. So I think there are a lot of good things to come, and I’m excited about where we are now.
Douglas Mitchelson
So not surprisingly, we’re going to touch on each one of those. But first, Charter touches the consumer and the economy in a lot of ways. So what have you seen recently, in the health of the consumer, obviously, the stock market certainly reflecting elevated concerns. I’m also curious to find out what you’re seeing, what are your biggest concerns for the current economy. And how does Charter respond, particularly if inflation remains elevated for an extended stretch?
Jessica Fischer
Yes. On the consumer side, we had our lowest-ever levels of nonpaid churn, which is really what I look at from a consumer health perspective in the first quarter. And we’ve seen maybe a really light uptick out of that sort of historically low level, but both on an absolute basis and when you compare it back to where we were in the pre-COVID environment in 2019, nonpaid churn continues to be extraordinarily low.
I attribute that to a few things. One is if you think about our involvement in the ACP program and getting subsidies for consumers, I think we’ve done a lot to try to look for consumers in our base who are eligible for those subsidies and to get those for those consumers, which sort of inoculates the base against some of these economic worries.
I think because broadband has become the way that a lot of people go to work and to school, it’s become the way that you and I are able to interact sort of in this conference that, that sort of added importance of the service is overall helpful. And then I think about our pricing strategy and sort of the bread and butter of what we’ve always been, which is somewhat who prices value to consumers and what we’re doing in the Mobile business, where we can save consumers hundreds or even thousands of dollars on their mobile service by switching to us.
So I think when you pull those things together, that in spite of sort of obvious economic headwinds coming to consumers, I think we’re pretty well positioned. I said in the first quarter, and I think continues to be true, that while there is some marginal impact on the P&L that we’re seeing from inflation, obviously, we have to buy fuel for our trucks, and we have to transport things around, the impact on the P&L has been relatively insubstantial thus far. But I think from an industry perspective, we’ve been a rational industry around pricing.
So I don’t think that we have to take price right now, and it’s not our habit to do so. If we needed to maintain growth in an inflationary environment, I do think that the market is supportive of that kind of movement. So I know that there’s a lot going on in the economy. We’re not burying our heads in the sand. We’re sort of out there working on all the issues the way that everybody else is. But in terms of the impact that it has on our business and the growth of the business in the long term, I’m not that concerned.
Douglas Mitchelson
Makes sense. And you were — you mentioned broadband, and investors are very focused on the broadband marketplace, both increasing competition level of maturity, so let’s start broadly there. Is broadband still a growth business for Charter? What does Charter have to get right to succeed in broadband?
Jessica Fischer
It’s absolutely still a growth business. I think on one hand, we’re still in a lot of markets where all of the other providers in those markets are really inferior technologies. And as consumer usage continues to grow, I think we will continue to take share in those markets just based on the — on how our product is able to compete versus theirs and the investments that we make and continuing to make it better.
In markets where there’s a competitive technology, you think about our fiber overlap markets. In the past and even today, we’ve had differentiating factors. So if you think about our ability to provide video service and to provide those sort of fully loaded video bundles, that was really differentiating in the past. It’s still differentiating for a group of consumers.
Similarly, the addition of our voice services, differentiating for certain consumers. I think mobile steps into that role as well, where mobile, because of our ability to provide a lower-priced mobile, because of how it writes on the combination of our network in the MVNO and also our ability to provide better customer experiences there.
And the piece that we’re working on, really offering the convergence of those products so that people use their broadband and their mobile service as a single product, I think that’s a differentiator going forward as well.
So I think that, that means that we’ll continue to take shares across those markets as well, which really means that on both sides, there’s a lot of potential to continue to grow in addition to the footprint expansion and sort of the other investments that we’re making in growing our customer base.
Douglas Mitchelson
And I did want to drill down a little bit, and I’m not really sure what you’re prepared to share, but I’m just thinking about investing in the product qualities and capabilities of broadband, the technology passed and the cost to augment the HFC network to keep up with demand and perform well versus fiber pure plays. Any thoughts on where and how much you’re investing in broadband?
Jessica Fischer
Yes. So we’ve talked about spectrum splits. And I think changing the Spectrum split and what we’ll do with the planned pair, which will enable gigabit speeds in the upstream and multi-gig speed in the downstream is an extremely capital-efficient upgrade. Not prepared necessarily talked about cost per passing, but I can tell you that it’s much, much less expensive than doing something like going to fiber.
And I think consistent with the guidance that we’ve given before, that you can have a capital plan where capital intensity stays the same or comes down over time. And while there might be some sort of bumps and dips in terms of how fast you decided to go and do you accelerate versus spending evenly over time, some of that capital, ultimately, I think that guidance stays the same, that inside of that capital intensity, you can go and offer those speeds.
And the DOCSIS 4.0 technology is — it is coming along quickly. And I think that we’re excited about where it’s going and some of our tests, the speed that it’s been able to deliver. And so we’ll have to work through. We’re good stewards of capital. So as we start to spend, if the right technology to be deploying changes over time, like, we’ll adjust and start deploying that technology as it’s appropriate to the architecture of the market and the competitive environment and sort of all of those things.
Douglas Mitchelson
Right. And certainly a question that everyone listening in is interested in. Last month, Tom said the activity levels were starting to increase a bit from April into May, and I would know there’s some nervousness that cable — among investors, that cable broadband net adds could end up being short of expectations or even negative in 2Q because of seasonality. And I know you typically don’t talk about intra-quarter trends that often. But I’m still going to ask you because it’s a pretty sensitive environment. Anything you’re willing to share regarding 2Q broadband trends? And are you able to close out the risk for negative net adds in 2Q?
Jessica Fischer
Yes. So you’re right that we generally don’t discuss net adds on an inter-quarter basis, but there’s a special circumstance. And because of that, I’m going to make a comment on the second quarter. As you know and as I mentioned before, we’ve been an active participant and proponent of both the emergency broadband or EBB program and its successor, the affordable connectivity program or ACP.
And while we’ve acquired some customers into the program, we’ve also worked really hard to get the subsidies for our existing customers who qualify, which we believe has resulted in us having a much larger population of EBB and ACP subscribers than probably all other broadband providers.
As part of the transition from EBB to ACP, a small portion of those subsidized subscribers either didn’t opt in to continue their service after EBB or they didn’t meet the ACP requirements, particularly the requirement that customers use their service in each 30-day period, which that issue covers the vast majority of the impacted subscribers.
Accordingly, they have or will be disenrolled from the subsidy program, and we’re no longer going to count them as customers as at the end of the quarter. Ultimately, we expect the result of that removal to be around 60,000 to 70,000 customers during the second quarter from previously connected EBB customers last year and earlier this year. And those terminated customers are in excess of our normal EBB and ACP chart activity.
So if I exclude the impact of the EBB transition to ACP, we do expect positive total net Internet adds in the quarter. And I think that we’ll have positive total net Internet additions even when including the headwind that I described. What that tells you is that we do continue to grow our Internet customers on an organic basis even in a quarter where traditional seasonality is clearly back. And as I stated earlier, we continue to believe in our ability to grow the broadband business going forward.
Douglas Mitchelson
One area that still kind of remains open, and you’ve been asked and answered this the last couple of quarters, but subscriber growth slowing for cable. Is it clear to management, and I ask because each month, you get new information, how much of that slowdown is market-related versus expansion of fixed wireless and fiber footprints?
Jessica Fischer
It’s never perfectly clear, but I’ll tell you the way that we think about and look at it. So we can see — if I start with fiber, we can see the results that we have in our fiber overlap areas and the results that we have in our nonfiber overlap areas, and we are able to compare those to similar results in prior periods.
And with — consistent with what we said in Q1, sort of the reduction that we’re seeing in gross adds and in churn has been consistent between those fiber and nonfiber footprints. There’s always a little bit of growth of fiber overlap during the period, and that has always had some impact on net adds.
But the amount of growth hasn’t been significantly different in our footprint between what was happening one or two years ago and what’s happening now. And so that’s where you hear from us, as you said, the continued refrain, that we still see market activity as the primary driving factor. And it’s because we see so much of the same issue across both our fiber and nonfiber footprints.
Fixed wireless is a little harder to point out and to pick out, and it’s because they’re spread kind of all across the footprint. And the relative amount of additions that they’re taking in our footprint are actually quite small relative to the overall net adds that you see is always small, but there’s always gross adds and churn that are much larger underneath it. And so when you look at what they’re taking relative to gross adds, which is really where they are, it has been quite small. And it’s hard for us to see, could it be that they’re taking DSL subscribers who would have come to us? That’s hard to pinpoint. Overall churn across the footprint remains extraordinarily low. And because of that, it certainly doesn’t look like we have customers walking to them.
But I’ll go back to what Chris said. I think people liked it when we called it parking lot. Those customers, if you look at the product that they’re able to — they’re being offered and the issues with congestion that are likely to happen in the longer term, those will be our customers someday. So while there might be some intermittent period of time where we’re sort of — where there might be a small number of customers who go in that direction, I think, ultimately, in the long term, those end up being our customers.
Douglas Mitchelson
So that segues over to mobile. I’m curious how you balance using mobile to deliver value to customers and increase loyalty, particularly on the broadband side versus driving profitability for that service.
Jessica Fischer
I love that people ask this as an either or question. I think it — it’s always a both. The first piece that I would point out, though, is that I don’t think that hard about mobile profitability as a segment. Because when I think about what Charter has, we have this big network that passes 54 million homes, right? And so the thing that I can do as a manager of that network is that I try to create as much cash flow on a customer-by-customer basis as I can create. And one of the ways that I do that is by having more customers, which I think will do with Mobile by virtue of the fact that we’re able to provide, as I’ve said, both better service and a great value to consumers and the pricing that we’re able to offer. Even at that pricing that we’re offering today that I think is game changing in terms of the mobile landscape, we’re generating margin on a customer-by-customer basis that contributes to this total pool of sort of how much cash flow can we generate for each customer.
And so I do, I continue to think it’s both. You might see, because we manage the business that way, that there could be changes over time in the way that we market the combination of products, right? And so the lines get blurred really easily if you’re providing two services as to which one is generating the profitability. But in the long term, I think that what we’re trying to do is create the most cash flow passing that we can create. And I think that mobile puts us in a great place to do that.
Douglas Mitchelson
How much room is there to grow Mobile at Charter? I mean you had a terrific first quarter. Comcast did as well. I mean, if you’re just doing what you’re currently doing, how much room for growth is there? And then what might influence your ability to grow mobile? What else can you do that’s new and different? What are marketing channels, whether pricing and packaging, other features and functions that might cause you to extend your growth beyond the current trend?
Jessica Fischer
Yes. So we have 54 million passings. We have a little under 2.5 million Mobile customers. I think that, that means that there’s lots of space to continue to grow. And as you said, it’s been growing very quickly. We’re happy with how that growth has been coming, and we think that we have the potential to continue to put up those solid growth numbers going forward.
The second piece, we have been sort of thinking about what it is to create this converged connectivity product. So I don’t have anything that I’m prepared to share today. But I would say that we are working through that process of figuring out what those bright features are and figuring out how we tell customers what they have access to, but really creating an experience for customers that’s different and better than their mobile experience today.
Douglas Mitchelson
And is there any learning so far in terms of churn on those combined mobile broadband customers versus broadband stand-alone?
Jessica Fischer
I think that we think that it is having an impact on churn. In this very low churn environment, sometimes just the stats of trying to get at exactly how much impact it has or difficult, because there is some correlation versus causality issues into what can be some noisy data. But I do think that we think that it has impact on churn. And in the long term, I think that we think we’ll be able to use it to drive more gross additions as well in a more normalized gross add environment.
Douglas Mitchelson
And you touched on this a little bit in the conversation, both sort of converged price in the comments on macro, but I still want to dig in a little bit on how you think about broadband pricing as a management team in this environment and the value of delivering to customers, especially relative to competitors. A lot of competitors come through the conference that indicate that they’re promoting and pricing at or below cable. And I know you’ve often talked about being on the value side of that equation. What do you see in your markets in terms of relative pricing? And again, how do you approach broadband pricing in this environment?
Jessica Fischer
Yes. We’ve always had consistent pricing across our footprint that we think drives consistent value to consumers. But then we have promotions that can target groups of consumers or can target particular areas. And we’re always sort of adapting to the environment in terms of the promotionality that we offer. We keep very close tabs on our competitors and the pricing that they’re offering in various components of the footprint. And I think we continue to compete very well with them in those spaces and to believe that our product delivers a value to consumers.
And with Mobile, on top of that, the opportunity that you have — if you have a customer that today takes two unlimited lines from one of the large MNOs, those two unlimited lines probably cost them somewhere upward of $100, maybe $120. You can bring them on to Spectrum and have them have a broadband connection, along with two unlimited lines for $120, makes the broadband almost free.
And so I think that there is, across our pricing strategy, an opportunity for consumers to get more service and that we continue to be priced in a way that’s competitive, and that will draw people into our business.
Douglas Mitchelson
And I’m not sure if we can carry that sort of discussion of convergence further some more because I’m just curious what the long-term opportunity there is when you think about converged fixed and mobile connectivity products. And I guess that goes across the ability just to execute on that, teaching consumers that — about converged, often. They purchase broadband and wireless at different points in time. So there’s organizational execution, there’s consumer expectations and there’s profitability strategy, margins and all that. Any thoughts there?
Jessica Fischer
I think that the consumer side is probably the space where we’ll continue to have work to do. And I think people will see us starting to do that work. But I think right now, like the advantage is that the broadband product and the mobile products are both quite marketable on their own. And I don’t think that you necessarily have to have consumers make that acquisition choice of sort of all products at the same time. I think that what we’ve been doing in selling mobile, both at acquisition, but also selling a lot of mobile into our base.
Once again, you talked about inoculating the base against future activity. It creates customers who have that sort of better converged experience and then reduces their propensity to churn in, in the longer term. And so I think that we fully believe that, that will be successful.
So I think that the opportunity is there. You’re right that we have to execute on it. I think executing on the operational side is clearly part of our DNA. I think that we’ll execute on the marketing side as well. And I think that overall, it’ll be successful because I think it brings value to consumers, and we’ll help them realize that value.
Douglas Mitchelson
Yes, it’s going to be interesting if we do get to the day where it did just becomes a standard way of approaching business and those who don’t have a mobile bundle or executing on it well with a good network will be deficient to those who do have that. Your competitors are switching to sort of consistent everyday pricing rather than promotions with large step-ups. If I think on the wireless side, to some extent, you have a similar approach, but that might be different than your sort of legacy broadband and video business. How do you see Charter’s go-to-market strategy evolving over time, if at all, perhaps what you’re doing works perfectly well?
Jessica Fischer
Well, on pricing and packaging, I never say never because ultimately, we will evolve into the marketplace and do whatever we think makes sense to drive the business and drive customer growth. I would say in an environment where our churn levels are at sort of record lows. It doesn’t feel like there’s a lot of pressure on the sort of promotional and then step-up pricing environment. But if ultimately, we’ve decided that, that’s driving an issue, I think that we have the flexibility to go down whatever path makes sense.
Douglas Mitchelson
Okay. Switching over to edge-outs, a really big picture perspective. I think the expectation for the rural build is about $5 billion for 1 million customers, so 5,000 home passed. I think that’s four parts, Charter capital, one part government subsidy. And you talked about a long payback period, but mid-to-high teens or IRRs in the project. So are those good broad strokes understand the BDID opportunity as well? Or are there going to be important differences?
Jessica Fischer
I think from an IRR perspective that it’s a good broad stroke to just think about our expectations around investment when we get to the subsidized build. Whether it’s true on a project-by-project basis, states have been bidding a lot of subsidies, and that we’ve been costing out some of — both for those and what we think might come up in the BDID program. And I certainly have seen passings that look a lot like the RDOF passings. I’ve also seen passings come through that are quite expensive.
And so whether that subsidy level remains consistent or whether it changes because of the makeup of the total set of passings, we’ll have to see and we’ll have to see sort of where states are willing to go with those overall funds. But we’re committed to being part of the solution for rural broadband. We’re in there, modeling it out. We’re cognizant of the environment that we’re in. But ultimately, we think that we can build a lot of those passings and make a return on them, as you said, in the long term, that will be — that will drive good growth for the company. And so I think we’re excited to be continuing to be out there bidding on it, and we’ll see how it goes.
Douglas Mitchelson
We’ll see. Let’s turn on the commercial side, curious, you all, for SMB and enterprise, it feels like there’s still enormous market there that you’ve got the ability to gain share. And any sort of technical capacity that you need to acquire or build to address any of those marketplaces would be helpful.
Jessica Fischer
I don’t think there’s technical capacity we need to acquire or build. It’s actually — it’s an area of the business where we’re an insurgent instead of an incumbent. That really was this pace of the legacy telcos. I think we’ve been doing a nice job of taking share across those markets, SMB and enterprise, particularly when you take out the impact of the wholesale business, which has had issues over time and has been shrinking. It makes up less and less of the total portfolio.
So the drag is less than it was before. But the remainder of that on the enterprise and SMB side, I think there is a lot of potential. We’re underpenetrated. We’re priced and packaged well. I think we can continue to grow it very well.
Douglas Mitchelson
And then moving over to video. My only question is actually on half aggregation, which quite a difference from five or 10 years ago. We’re quite obsessed with video for cable companies. You recently announced that JV with Comcast development offer streaming video platform. So how would you articulate the opportunity to compete at scale in the streaming operation business?
Jessica Fischer
Yes. So you have, coming together in that joint venture, two legacy cable providers who, I think, have an aptitude for the aggregation side and also have a lot of interactions with consumers who are at the point where they’re considering video products. And so I think when you click that together with what really Comcast has created, it’s a world-class platform that we can deploy fully across a national footprint. I think our opportunity to sort of reach scale there and to do so pretty quickly is very good.
And I think it will do something that’s consistent with our overall video strategy, which is that we’ve shrunk more slowly than some of our peers on the video side because we’re always looking to provide the packages that consumers want. And so I think that the [AppCo] product enables us to sort of do that even more broadly, whether consumers want linear, whether they want streaming, whether they want skinny, whether they want fully loaded. We’re going to be in a place to pull together what it is that consumers are looking for.
So we’re excited about the opportunity. As you said, the video space is evolving. You’ve mentioned it on a prior question. But I would say on this one, you look at each time the question gets asked and the space looks different, it looks different than it did a month ago when we were talking, when we — as we talk about video over time.
So we’re excited about where it’s going to go and to see how it evolves. I think that we’re going to be in the right place and that we have the right skills for aggregation when the right point in time comes around for that. And we’re really excited about the ATCO platform and about sort of the customer-facing, the customer experience that we’ll be able to provide with a fully modern video platform for our consumers.
Douglas Mitchelson
So I’ll take a shot at it with low expectations. But when you say reach scale quickly with the product, how do you achieve that?
Jessica Fischer
Oh, man. So, I don’t have a plan that I can sort of roll out here. But I do think that you’ll see us finding ways to put products into the market. And I think ATCO itself is out there on the retail side, selling televisions as well. And I think that we’ll be able to grow the business quickly.
Douglas Mitchelson
So margins. Help us understand the cross currents and cost to serve customers. That’s sort of the OpEx CAGR I wanted to hone in on because I felt most of the rest of them were a little more straightforward. But particularly once the minimum wage step-ups, annualize early next year for your holiday workers. Is there still legs to efficiency efforts that have been beneficial the last few years when you look at that cost category? Or if you want to make broader comments on margins, those will be welcomed as well.
Jessica Fischer
I won’t make a broader comment on margin, because margin is not how I think about the business. I think about it in terms of how much cash flow you can deliver from a passing, which sometimes means you sell a mix of products that don’t deliver the best margin but they deliver but best cash flow, which is ultimately what we should do.
But on the cost side, if you’re talking about cost-to-service customers and whether we can continue to bring down the cost to serve each customer, I do think that there’s still a great opportunity to do that.
One example, so we’ve been working on a program that we call our Proactive Maintenance Program. And today, with telemetry, we’re able to detect when a customer is having service issues with their devices in the home. And we’re also able often to pinpoint, whether that issue is inside of the home, whether it’s instant wiring, whether it’s in the drop between our line in the home or whether it’s sort of out in the network at large.
And so we’ve always used that to do our network work. But now we’re actually using it to reach out to the customer and say, hey, I see that you’re having a service problem. We can see that it’s either in that drop between the street in your house or we can see that it’s inside of your home. Can I schedule a customer service appointment to come out and fix the issue that you’re having, so that your service improves? That’s a differentiating experience from a customer side, right? It’s much different from you having to call it and tell me about the service issue that you’re having. I don’t have to pay for the call that your consumer experience is better. We can then see when the technician goes out to the home, whether the issue is corrected or not. So it makes us more accurate into reflecting the issue the first time.
And from a scheduling perspective, when you think about the kind of the ebbs and flows of the needs for technicians, you have a storm, you might have a bigger need. But on a random Monday, maybe you have fewer calls and therefore, fewer needs. By doing this proactive maintenance, we’re actually able to manage our appointment schedule better, which also makes our deployment of our technicians sort of more efficient across the footprint.
And so that’s very in the weeds, but it’s one example out of what I would say is many of how is it from where we are right now that you continue to both better the customer experience and to do it in ways that ultimately drive down the cost of maintaining your network.
And so I think we do, we continue to have a tremendous opportunity to do those things. Every time you look at it and say, wow, we’ve been really successful in driving cost down. We’ve been really successful in trying to make truck rolls down. We turn around and do it the next year because there continues to be the opportunity to improve experience across the board and to make our services more efficient.
Douglas Mitchelson
That’s helpful. I think the last two topics, not surprisingly, CapEx and allocation of capital. You talked about CapEx a little bit already, but I still want to walk through it maybe in a little bit more detail. It comes off a lot in investor conversations. We think about broadband competition, and concern is subs price and the need to invest in the network. And I’m just hoping you can walk through the swing factors in CapEx outside the RDOF spending. We think about that scope for network investment. Are there areas where you might pull forward investment or areas where spending might ease? Just how does that all shake out?
Jessica Fischer
I think the space where you might pull forward investment is clearly in the network evolution space. But ultimately, I think there that our goal is always to be a good steward of capital, to upgrade the network in the most efficient way possible, which is the path that I think we’re headed down, but in a way that also provides the service that we need to provide both to consumers and from a marketing claims perspective.
So I think that, that will be successful. But does that mean that you might have some chunky capital? You might have some earlier spend followed by reductions in spend related to the fact that you already sort of did the work previously? That could happen. We gave guidance for this year. I don’t think it happens in this year. But over time, could it come up? I think it can.
In the other areas around our capital spending, I think that they continue to be — I mean, obviously, in the line extension side because of RDOF. We continue to have additional spend there, but I think that spend is accretive to the business overall. So I don’t think about it as you’re part of that maintenance CapEx bucket. And on the maintenance CapEx side, I think we continue sort of do well in investing the way that we are. And I don’t expect a lot of sort of up and down in those spaces.
Douglas Mitchelson
All right, makes sense. And then allocation of capital, near and dear to your background in M&A. Do you see the potential for a significant amount of M&A over time? And how do you balance building new footprint versus tuck-in M&A versus buying, I guess, venture cable companies or buying cable versus buying Charter stocks, especially given what’s been happening in the market. So where are the best returns? And kind of background of the question, to the extent that whether it’s the capital markets getting tougher or the extent that fixed wireless is taking a little bit of share in the short term, perhaps there’s increased pressure on some of these private cable companies. They might be more willing to sell than they have in the past. So just curious, activity levels and how you balance capital allocation.
Jessica Fischer
Yes. We like the cable business. And so if we can find opportunities where we think we can create accretive value to our shareholders by going out and doing acquisitions, I think that we’ll continue to do that. We certainly will continue to invest in expanding the footprint.
When I think about it sort of versus the share buybacks, while I fully agree with you that if I look at pricing today and I look at sort of the cash flow that we generate, there’s certainly a lot of return to be had just from going out buying my own stock. They have to be supported by multiples at the back end, right, terminal multiples. And the way you generate terminal multiples is by continuing to grow.
And so I think we have to invest in the growth of the business as well. And so our capital strategy hasn’t changed. We’ll invest in the business. We’ll go out and buy businesses that we can buy at accretive prices. I don’t know. I hope that you’re right, that there might be private businesses out there that are more pressured to sell than they were before. But obviously, we’ve been here talking about how we like a cable business is for some time.
So if they’re available, I think that we’ll go there. And then after that, if there’s cash flow left over, we’ll go — and consistent with our leverage levels, we’ll go and buy our own shares.
Douglas Mitchelson
And if I could follow up and maybe you’ll wait until the earnings call to reaffirm this, but any changes in balance sheet strategy, leverage targets, given the change in the interest rate environment or macro uncertainty?
Jessica Fischer
No, not right now. And actually, maybe definitively no. I think that we’re still planning to target at the high end of our 4 to 4.5x leverage ratio. I think certainly, I’m cognizant of what’s happening in the overall interest rate environment, also cognizant of sort of the other factors, what we believe about the growth of the business, what we can do given the multiples where our shares are now.
And I think that we have flexibility in our balance sheet. And so we don’t have to be fully beholden to the rates rising and sort of the rate that they have been and if you’re out on the 30-year end of the curve. So no. So I think that I would reiterate, we still are comfortable with the space that we’ve been in, and I think that’s where we’ll continue to be.
Douglas Mitchelson
All right. Well, I’ve run us out of time. Jessica, thank you so much for your time. Thanks, everyone, for listening in.
Jessica Fischer
Thanks, Doug.
Douglas Mitchelson
I appreciate your participation. Thanks.
Jessica Fischer
Thanks.
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